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Insurance Law Spring 05 Student Notes

About These Notes

Okay, these notes are like 7 years old now. Still, 80% of the cases are the same now as they were then. I think these are pretty good notes that might be useful to you. (Or not.)

2nd Half of Class Notes (after Midterm)

Professor Miller


  • Auto Insurance
  • Maryland Transportation Code
  • § 17-103
      1. Except as provided in paragraph (2) of this subsection, the form of security required under this subtitle is a vehicle liability insurance policy written by an insurer authorized to write these policies in this State.
      2. The Administration may accept another form of security in place of a vehicle liability insurance policy if it finds that the other form of security adequately provides the benefits required by subsection (b) of this section.
      3. The Administration shall, by regulation, assess each self-insurer an annual sum which may not exceed $750, and which shall be used for actuarial studies and audits to determine financial solvency.
    1. The security required under this subtitle shall provide for at least:
      • Under Md law, you are required to offer PIP insurance; if you waive it it must be in writing (knowing and involuntary). If you refuse it but do not sign the waiver, you still have it.
      • The policy travels with the car – no matter who is driving.
      • Collateral source rule in Md- even if you decide to use your PIP and it covers the damage, your insurance company still owes you.they cannot use PIP as a defense.
      • Title 17 of the insurance code is divided into three subtitles consisting of 11 sections
      • Maryland min is 20/40/15. Other states are different. Pennsylvania is 30/15/5.
      • In Maryland , financial responsibility is directed to the OWNER of the vehicle, not the driver (at least not primary). For example, in a personal injury case in Maryland , PRIMARY coverage would go to the owner of the vehicle that was driven by friend that has own insurance.
      • Maryland ‘s scheme is 10/20/15. After much debate, General Assembly raised property damage min to 15K in 1999.
      • There are motorcycle, taxicab, farm equipment, state owned vehicles and other exceptions under 17-102 of the Maryland code. These accidents are not necessarily covered by the min policy requirements
      • MAIF: Maryland state funded insurance company for those who have been rejected. 17-105(a).
      • Uninsured penalties under 17-106(e) of Maryland Transportation Code: $150 fine for first 30 days; $7 for each day thereafter. If you switch insurance companies in Maryland , you are likely to get a letter seeking proof of insurance from MVA.
      • Personal injury cases in Maryland are often limited by the amount of the policy. The key is finding insurance coverage. You have to know where to look. Maryland public policy is designed so that there are many different places where coverage may be available.
      • From Plaintiff’s perspective, biggest cases in Maryland involving auto accident typically involve tractor trailers or other commercial trucks. Invariably, they have large insurance policies. Judge does not tell jury about (1) insurance policy limits (2) that insurance even exists or (3) cap on noneconomic damages. Jurors usually know from their own experiences in auto accident cases that there is insurance.
      • Best jurisdictions in Maryland for Plaintiffs: Prince George ‘s County and Baltimore City . If bring personal injury case, attorneys look for creative ways to get venue in those jurisdictions. Maryland law favors Plaintiff’s choice of jurisdiction. Where does Plaintiff live is important to judges? Also look to see if Defendant carries on regular business there. See Dodge Park Enters. v. Welsh
      • Maryland PIP Insurance (Title 19 of Transportation Code)
      • Maryland ‘s mini no fault; trying to provide coverage for auto accidents.
      • Practically important for clients -and personal injury attorneys – in small Maryland personal injury cases because it increases clients “in pocket” recovery from insurance
      • Maryland Court of Appeals in Travelers Ins. v. Benton says plan was for everyone to have PIP. But this has never been true, there are 4 key exceptions under which there is not PIP coverage in an auto accident.
      • Exceptions
      • Waive it – better be in writing in Maryland regardless if insured is not paying for it and must also be a “knowing” waiver – covers all named insureds, listed drivers, etc. but can’t waive for your buddy
      • Taxicabs
      • Buses
      • Gov’t owned vehicles
      • Stolen vehicle – permission question of fact in Maryland : Bond v. Penn National, 1981 Court of Appeals Opinion
      • Intentional injury – road rage no PIP in Maryland ; similarly no PIP trying to outrun a cop
      • MOTORCYCLES – PIP exclusion in Maryland personal injury cases
      • PIP covers 85% of lost wages
      • Household sevices: claim rarely made but see Maryland Transportation code 19(505)(b)(2)(iii).
      • 12 month statute of limitations but for injuries made up to three years 19-508(a)(2)
      • Maryland COMAR regulations as of 1983 say that Maryland PIP policies must apply to out-of-state personal injury cases
      • Typically $2,500 in Maryland but has seen PIP polices up to $20,000
      • Permissive users and guests covered in accidents
      • Attorneys’ fees: ethical rules say no contingency fee for PIP unless contested – most good lawyers in Maryland do not charge fee for handling PIP claim
      • HYPO: How the policies work when there are coverage problems?
      • I get in accident with bad guy. Bad guy has MAIF. I am hurt 80K worth. MAIF is in a weird spot here b/c the estimated value of the claim is well over 20K. MAIF can either say take the policy or let’s roll the dice and see what happens at trial.
      • Md Statute says: f you are going to operate a motor vehicle you must have at least a 20/40 (20 per person, with a max of 40k). This is the same for every insurance company. And so because if this statute Md developed MAIF.and to get MAIF you have to be a bad driver. You have to be rejected by other Ins. Co.’s and have written proof of that rejection.
      • Say I have a 100K policy. MAIF runs a risk by letting the case go to trial because they have a duty to try and resolve the case with me for a meaningful amount (fair market) and if they do not do that they run the risk of paying an excess verdict because of bad faith. I will tell the bad guy that she should sue MAIF for bad faith.
      • Lets say I win at trial: I get 20 from MAIF, and 60K from my own insurance company for my underinsured motorist coverage. BUT then my insurance company turns to bad guy and sues her by subrogating against the real bad guy, the underinsured motorist who actually lives in a fat house.
      • Pay to Play: lets say MAIF protects the bad guy and gives up the 20K. at that point the 100k Ins Co can allow the bad guy to pay the 20K and if MAIF lets her do it then MAIF waives the subrogation rights against her. BUT if 100K Ins Co says we will opay
        the 20K for the bad guy…then they do not waive subrogation. At trial both lawyers are there.MAIF has to defend bad guy because it is their duty, and 100K ins co are both on the ? side.
      • Say I say MAIF go to hell…I don’t want your 20K (because I have a good case and wanna go after the bad guy. But then MAIF cannot be sued later because they did not act in bad faith.
      • HYPO What do you do if you are the lawyer? Personal Injury Case in Maryland : B crashed into D and breaks D’s wrist. D gets treatment, and D has 7K in medical bills, 3K in lost wages. D has a 2,500 PIP policy and settles his case for 30K, D’s lawyer is able to reduce medical liens by 2K. Case is settled before trial – so he pays a 3 rd of the settlement.and he takes 17.5 in his pocket
      • If the employer were to pay lost wages, they would have a lien but it is unlikely they go after it. Only the military does that.
      • Underinsured motorist case hypo – 4 guys in car (2 in front, 2 in back), driver has 20K policy, passenger (food fight) has 100K policy. They claim they had a food fight at 7/11 before they drove away. The car in front of them veers off the road and they end up running directly into a backhoe. The driver has 300K in medical bills. And passenger has 100K. The guys in the back have 4K and 200K. The backhoe has a 7 million dollar policy. The question is whether the food fight happened in the car or at the 7/11 first?
      • The driver is in a coma.has the best case if he was not negligent at ALL because he has the worst injuries but he has the worst case because if he was at all negligent than he gets nothing. Any scintilla of negligence means no money. The passengers in the back recover no matter what because they are harmless. If driver is responsible, then the passengers get his 20K, if both guys in the front (the driver and the alleged food fight starter) are responsible then they get 120K.more money but still not enough. If everyone is at fault (the backhoe co too).you go after the deepest pocket.
      • The rule would have to be that everyone culpable would have to be a substantial contributing cause of the accident . If the back ho guy is a SCC of the accident then they can tap into that policy, and win.
      • What if the accident didn’t involve anyone in the back seat? There policies are the same but they each have 20K in damage. In this case they would sue each other. The passenger sues the driver and his own policy. (The food fight guy has a possible intentional tort against him for throwing food.)
      • The total was 30K, -20K lawyer fees, -5K medical bills + 2.5K PIP =
      • McNeill v. Maryland Ins. Co. Guaranty Association (pp. 697-701) – if I am using my case in way that is not in the ordinary maintenance of the care then it is not within the policy. Maryland Court of Special Appeals case that made it to our textbook. In McNeill, victim injured when car battery explodes when jumpstarting another car. Court found injury arose from used contemplated by policy. Lots of Maryland law addressing maintenance issue. Northern Assurance v. EDP Floors , 1987 Maryland Court of Appeals case
      • The question of whether loading and unloading a vehicle is use contemplated by policy in Maryland and covered by auto insurance policy is open to interpretation
      • DeJarnette v. Federal Kemper Ins. Co., 299 Md. 708 (1984).
      • Evans p. 702-
      • Throwing the lit M-80 from the open trunk of a car being used as shelter but not in motion was not a causal connection to the injury resulting from the firecracker and so the insurance company need not cover the insured car owners because the car was not “in use” within the terms of the policy.
      • Uninsured Motorist Protection in Maryland
      • Protects against driver with no coverage
      • Subtitle 5, Title 19 of Insurance Article
      • Maryland General Assembly made mandatory in 1989. Before it was like PIP in that insurer had to make it available. But you can still waiver higher limits in Maryland and stick to 20/40. Waiver rules in this similar to PIP.
      • Not mandatory in all states but 49 states at least require that it be offered
      • Typically capped at your own third party liability limits
      • In Maryland , the insured injured in an auto accident may sue directly the carrier of UM coverage before suing the at-fault motorist. Reese v. State Farm – real u pside for Maryland auto accident lawyers: point at the insurance companies who did not honor their contract to their insured who faithfully paid their premiums every month (probably not entirely admissible on the paying premiums for 20 years but some judges will let it in)
      • Hit and run drivers in Maryland : some states require physical contact with hit and run driver so you can’t point to phantom. Maryland does not require contact. Defense lawyers argue that a hit and run requires a “hit.” Plaintiffs’ personal injury lawyers argue contact creates a ridiculous anomaly: the less vigilant driver who does not hit another motorist is treated better than careful driver who avoids collusion. Problem arises where unknown motorist is attempting to pass another vehicle – a truck in the classic example – on a double yellow line -insured swerves to avoid head on collusion but accident ensures after avoidance. Under “contact” rule, the whole accident could be on videotape and it would not mattrer. Arizona case in 1993 struck UM policy exclusion because policy language unfair to insured.
      • Exceptions are generally same as Maryland PIP exceptions (not on exam) – nonpermissive use is a big issue: Plaintiff’s personal injury lawyers that statute should be liberally construed to promote this purpose and the exclusions that attempt to narrow the zone of coverage
      • Purpose is to place the auto accident victim in same position if the negligent party that caused the injury had the same insurance as victim
      • Uninsured motorist coverage in Maryland is “first party coverage.” Accordingly, the insurer has subrogation rights against bad guy when the insurer pays the insured for injuries
      • Can you get uninsured or underinsured motorist benefits in Maryland for punitive damages? Maryland court have yet to decide. (Good exam question.)
      • No stacking in Maryland with UM claim. Example: negligent driver has $20,000 MAIF policy. Good guy has $500,000 Allstate UM policy. Max recovery is 500k, 20 from MAIF, 480 from Allstate. Terms “stacking” is misleading because it leads to implication of double dipping or duplication of benefits. More appropriate term is aggregrating.
      • Underinsured motorist coverage is used to protect you from losses when the other vehicle’s policy limit is inadequate to pay for all your damages.
      • Workers Comp Setoff – UM carrier gets full setoff. 19-543(d) of Maryland code says insurer can offset company’s liability. Example: IWIF paid Plaintiff 40k for injuries related to accident. Plaintiff sues GEICO for uninsured motorist benefits and receives $500,000. Plaintiff receives 460K from GEICO.
      • How about the reverse? In the vast majority of states, including Maryland , courts have ruled that workers” compensation carrier was not entitled to be reimbursed out of sums payable to an employee under a UM\UIM policy, because the workers” compensation law did not expressly grant such rights

Health insurer liens and UM – read policy. Plaintiffs’ personal injury attorneys in Maryland argue not third party indemnify and therefore no right to subrogation.

    • Disability Insurance
    • Shapiro (total disability benefits) – This underscores the language of the policy and in the general circumstance of life this is an unfair outcome because the dentist is making out but because we construe against the drafter th
      e insurance company loses.
    • The unique language in the policy is not typical of most policies. Shapiro had a policy that said if he could no longer perform his job he could collect. He was a dentist and could not perform dentistry but could do administrative work and make just as much money. BUT his policy said his job specifically.he ended up making more money but not as a dentist.
    • Disability insurance is the most underutilized insurance b/c people are more concerned with life insurance. There are no “whole” disabilities you pay by the year and if you are not disabled in that year your money is lost.
    • Prudence Life Insurance Co . – issue over jury instructions and whether to allow in an instruction which says the definition of general disability.
    • General disability is not being able to perform your job or any other job. This is different and more common than the above case because the words of the policy protect the insurer more.
    • Health Insurance
    • Shelton – narrow interpretation of the policy language and that her operation did not fit within the definition of what a sickness is.
    • Mrs. Shelton was married first to a guy with a RH factor in her blood that was incompatible with her own blood. She had some children but having more was a real risk and so had her tubes tied. She later married someone else and had her tubes untied. She tried to get it covered and they denied her saying the procedure was voluntary, not injury and sickness.
    • Policy language – this is a narrow interpretation and really it this procedure does not fall within. The dissent says it is a sickness, but the majority goes with the strict constructionist view.
    • Fuller v. CBT Corp . – needing an expert to show why a cost should be attributed to a one of the two or both operations required a doctor’s expert opinion.
    • Had a growth on the vasectomy site and when he had it removed he reversed the vasectomy as well because he wanted to have kids again. He felt that if he tied the two procedures in together he would be able to get them all covered. To get summary judgment he would have shown the cost of the growth removal.and he should have gotten a doctor to say “to a reasonable degree of medical certainty this was the cost and this should be paid by insurance.” Because he did not get that he did not win.
    • Bullwinkel –
    • women had a lump in breast doctor says its probably nothing, she then changes insurance companies, got new insurance, and then finds out she has cancer. The new insurance company says that since this was a preexisting condition (the lump) they will not pay. The woman wants the court to remand the case back to the trial court and they do not.
    • The issue is whether any one could have known that the lump was cancerous before the policy became affective. Just because she had a lump doesn’t mean it was cancerous at that moment. The woman fails to show this in establishing her case and so does not establish a prima facie case.
    • The only inferences that the court relies on is that if it was cancerous in September it was probably cancerous in July. The woman did not establish a prima facie case because she did not get a doctor to say that it is my expert opinion that there was no cancer in July.
    • HIPAA – 1996 legislation to protect people from the plight of the woman in Bullwinkel: limits insurance companies ability to exclude because of preexisting condition. When changing jobs or insurers, an employee who has been covered for at least 12 months by an employer’s health plan could not be subject to a preexisting condition exclusion as long as coverage has not lapsed.
    • Property Insurance
    • Hostile Fire doctrine – if the fire in intentionally set and stay within its desired limits. Once it goes beyond that scope it becomes hostile.
    • Maryland does not have cases directly addressing hostile fire but assumption is it would adopt majority view articulated in Engle and Youse.
    • Engle – the fire can be intentionally started but once it goes beyond the scope of what was intended it becomes hostile.
    • The fire that was intentionally started in a furnace ended up burning longer than it should have and burned all night and the excessive heat killed the pigs in the neighboring barn. The fire was a planned event but it went beyond what was expected and so the farmer and his pigs are covered.
    • Youse – fire insurance policies cover hostile fires and not friendly fires.
    • Woman carries ring around in her purse with her. She puts it on her dresser and the maid accidentally tosses it and puts it in the incinerator in which it is damaged. The ins. Co. doesn’t cover it because the fire was friendly fire.
    • Introduction to Third-Party Coverages and Recurring Issues – a relatively modern invention. You always want to have high coverage even if you are poor because your uninsured motorist policy is going to be the same as a 20/40 and if you are seriously injured you may not get the money you need.
    • Stanley – this woman lived in a her own home, she babysat other’s children during the day and one day the coffee machine fell onto a little infant and burned him. (it is highly likely that a little kid would injure themselves at someone’s home while being babysat). So, this woman could be sued for the injury to the baby. (She could at worst have to pay a lawyer and pay this child’s medical bills…even if this person did not do anything they still have to hire a lawyer simply to answer the complaint.)
    • She has a home owners but it excludes any bodily injury arising out of business pursuits. This however was clearly a business pursuit; it was a daycare center, regular course of conduct. (as a matter of public policy we do not make babysitters to have insurance, but that is different than daycare)
    • (EXAM) The woman tries to argue that it was not business and that there is ambiguous language in the policy. BUT they still lose because the language that they are pointing to is not relevant to the issue in this case. The core issue of the case did not have anything to do with the language that was particularly ambiguous, the ambiguity was something totally unrelated.
    • Homeowner’s Insurance – the language is broad to cover a variety of things that occur on or around your property and this is done to protect the owners to ensure that if people are at risk of losing their property the insurance protects the house. It is required insurance because they have mortgages and still owe money on the house. (cars are typically excluded because you have to have a separate policy for that) SEE 542 note 6.exam
    • AMCO – this kid is a killer but this kid was just acting as a child and the majority says he did not do it intentionally for it to be considered intentional he had to have done the act and intended to cause the kind of harm which resulted (death) or at least serious bodily injury and an 11 year old boy could not foresee that.
    • 11 yr old boy, gets into a fight on the baseball field b/c on of the other boys is leaving, throws the ball, hits another kid and kills him.
    • Parents of the deceased child want coverage.and asked for 2 million (but meant to ask 5 million). The child was not covered under the ? ‘s homeowner’s insurance policy. Often these policies cover negligent acts of children, but not intentional acts.
    • Dissent says;
    • It has to be murder and anything short of intent to murder is not covered.
    • Even though it is likely that a broken arm or leg might occur that is not the same class of injuries as death.
    • Maryland likely to agree with dissent
    • Board of Trustees of the University of I
      llinois – when a policy excludes property damage which is “expected or intended by the insured” and that includes even when that act goes beyond the expected intended outcome.
    • Zavalis went to the stadium and laid lighter fluid down to burn letters into the field and instead burned the whole field, causing half a million in damage. The University wants $ and the parents insurance company will not defend their kid because it was an intentional act.
    • The parents couch their complaint in the framework of negligence if you are trying to bring about insurance coverage ( by saying it was negligent behavior instead of intentional and willful.)
    • The Nature of Coverage: (CGL)
    • The Insuring Agreement (p. 579)
    • CGL Policies (general commercial liability policies)
    • Gatx – (pp. 580-585)
    • employees in Gatx are stealing from one of their vendors.the issue is whether it is an intentional act that they took the stuff and that is not covered under CGL or that because of the negligence who was at fault, the guys who actually took the stuff, or the higher ups who were supposed to be making sure that no one was taking things. The primary responsibility lies in the higher ups.the company had to pay for it and now they want to be repaid.
    • The case settled and we never know why.
    • Montrose Chemical Corp . – when you have these kind of continual injury issues there are different points at which you try and pinpoint coverage, there different ways of apportioning coverage in the event of continuous injury. (in Md. – if you are a substantial contributing cause of the injury (i.e. the lead paint at so and so’s property would have to be more than just a mere contributor. Mayor & City of Baltimore v. Utica is 2002 Maryland Court of Appeals case that talks a great deal about continuous trigger). Maryland law may use continuous trigger, may use injury in fact depending upon context according to case).
    • Injury in fact – when is the person injured, when do they know or have reason to know that they are hurt (this is a plaintiff oriented way because you are trying to get the company that is more recent in time) – whenever the guy says he is hurt is the time that the injury occurs and that insurance company covering that company at the time when the injury was caused has to pay.
    • When the first exposure occurred – whichever company covered the culprit at the time the exposure occurred.
    • Acknowledge the fact that there is a continuous trigger – if you assume the trigger is happening over and over then each company is responsible for a portion of the exposure, but then you have to determine if it is linear or do a rough adjustment of the damage (meaning you have period and you split it the liability for all companies potentially involved.)
    • Latex gloves are causing medical problems for people wearing them. And there are certain kinds of diseases where exposure is cumulative. i.e. asbestos. And there is a question as to how much should be paid by persons that are partially liable. So they were trying to figure out whose gloves were causing the problem.
    • Punitive Damages
    • Billings –
    • Insurer doesn’t want to cover punitive damages and so asks if insuring punitive damages is allowed in Montana . The purpose of punitive is to punish the bad guy, and so there is a fear that the deterrent affect is lost when you do not have pay. (in Md. the standard for punitive damages is actual malice) (the standard in Montana for punitive damages is was very broad as to what events were not intentional) they had to narrow it.

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